Economy

Meet The Frenchman Behind Lending Club, The 'Google Of Finance'

For Renaud Laplanche, it all began with a credit card statement that seemed all wrong. Now, after helping to bring banking into the digital era, it's time for a major IPO for his SF-based firm.

Lending Club founder Renaud Laplanche
Lending Club founder Renaud Laplanche
Jérôme Marin

SAN FRANCISCO — Wearing a simple shirt and jeans, Renaud Laplanche has already adopted the Silicon Valley's dress code. Having moved there 10 years ago, the 44-year-old Frenchman runs Lending Club, an American pioneer in online peer-to-peer money lending that is preparing for an imminent initial public offering (IPO).

"I feel a lot closer to Google's philosophy than to the banks'," the entrepreneur says. And it's highly symbolic that the headquarters of the company he founded in 2006 are located in San Francisco's South of Market, the neighborhood where other Silicon Valley successes such as Twitter, Zynga, Airbnb and Uber are located. It's a far cry from the nearby Financial District, where, for example, Wells Fargo — America's biggest bank by market capitalization — is based.

Eight years after its launch, Lending Club is expected to win ultimate recognition in the next few weeks with its IPO on the New York Stock Exchange. On Dec. 1, the company disclosed an amended prospectus in which it indicated it was hoping to raise up to $796 million on the basis of a maximum value of $4.2 billion.


Lending Club's SF HQ — Photo: lulubelle05 via Instagram

This would make it the second-biggest U.S. IPO for an online company this year, behind China's Alibaba. And should the price of $10 to $12 per share be re-evaluated, Lending Club could even make it in the all-time top 10. But Laplanche tries to put things into perspective. "This is just one step in the company's growth," he says. "Operating as a listed company sends a strong signal. It says that we're here to stay and to change the banking system."

How it began

A former corporate lawyer in Paris and then in New York for Cleary Gottlieb Steen & Hamilton, Laplanche graduated from the Paris business school HEC and joined Oracle in 2005 when the computer technology corporation bought its first company, TripleHop Technologies. Founded in 1999 just before the dot-com bubble burst, TripleHop created an internal search engine designed for law firms before it was adapted to other sectors, including American media organizations. Laplanche left Oracle just before founding Lending Club.

"Initially, I was supposed to take a sabbatical for six months to a year to travel," he says. "But after two weeks, I got the idea for Lending Club."

It all began with a credit card statement. "I noticed that the interest rate was 18%. I then opened a statement from a savings account where I was making a little under 1%. When you're an entrepreneur and you see such a difference, it tells you that there must be some market inefficiency somewhere."

To narrow that gap, Laplanche set his sights on becoming the middleman between private individuals with capital and those who needed money. "He was determined to impose a new model at a time when almost nobody was talking about a sharing economy," recalls Loïc Le Meur, who invested in Lending Club. "But he had this ability not to listen to anybody and to go into an environment that was not his." The entrepreneur first started his activity on Facebook but was forced to halt a year later, pending Securities and Exchange Commission approval.



Lending Club founder Renaud Laplanche — Photo: Facebook page

In early 2010, Lending Club topped $100 million loaned. Since then, its growth has been unrelenting. It had reached $1 billion by the end of 2012. By Sept. 30 of this year, it had loaned $6.2 billion, with more than half of the sum loaned since the beginning of 2014.

"The volume of loans doubles every year," Laplanche says, stressing that he voluntarily sets a limit to better manage the company's development. "We're four to five times bigger than our rivals and are continuing to grow faster," he adds. "There's a real advantage in being the market leader, a bit like eBay had been at the beginning for online auctions."

Diversification is key

The website now allows loans of up to $35,000 that can be repaid in two, three or five years. Interest rates vary depending on risks, starting at 6.8%, and going as high as 30%. The average loan is $14,000 with an average interest rate of 14%. Lending Club is particularly attractive for people who are already indebted — those who, for example, have to repay purchases made with credit cards with rates that can top 20%. In fact, such cases represent 80% of the company's loans.

"We use a lot on online data and consult with credit rating agencies to identify potential clients, people with good credit qualities, a stable job and who spend too much money repaying their debts," Laplanche explains. The only thing left to do after that is to canvass them and convince them that they can save a lot of money. That's Lending Club's key to success.

The company also managed to convince almost 80,000 investors, who together shared $595 million in company interest. But the service isn't open to anyone who wants to invest in it. Certain conditions regarding resources and property have to be met. Investors can choose between seven risk categories, with interest rates that vary accordingly. To limit potential losses, Lending Club "securitizes" borrowing. This means that there isn't just one person that lends $10,000 to another, but instead hundreds of people who each lend a few dozen dollars.

"Diversification is the main protection for our investors," Laplanche explains, as the company boasts 99.9% positive returns on investments when the money comes from a least 100 lenders. With non-payments — which represent a little under 4% of borrowers — and commissions taken into account, the average annual return is 7.2%. "Most of those in finance who advise against investing in Lending Club don't earn you 7% a year," says Loïc Le Meur, who invested "several million dollars" in the company.

All-star investors

Lending Club was in the limelight in May 2013 when Google acquired a stake in the company, investing $125 million. "We've learned a lot from Google," Laplanche says. "They gave us loads of advice in security and marketing."


"Lending Club Google doodle" in the company's HQ — Photo: lulubelle05 via Instagram

Six months later, the search giant was followed by Russian billionaire Yuri Milner, who has made a name for himself over the past few years by investing in Facebook, Twitter, Zynga, Airbnb and Groupon. The company also attracted big names among venture capital firms, among them Kleiner Perkins and Union Square Ventures. Between 2007 and now, Lending Club has raised more than $400 million for its development.

To further improve its reputation, Lending Club has also recruited some big names. On its board of directors: John Mack, former CEO of Morgan Stanley; Larry Summer, Secretary of the Treasury under President Bill Clinton; and Mary Meeker, a star Internet sector analyst. "Lending Club has the potential to profoundly transform traditional banking over the next decade," a enthusiastic Larry Summers said in 2012.

"The goal is not to replace banks," Laplanche says. "We believe we can work hand in hand with them to help the system evolve." The company works with several banking institutions that invest the savings of their clients on the platform. And they also offer Lending Club loans to their clients. "We started with small local banks, but we recently signed partnerships with bigger firms," the entrepreneur explains.

Lending Club has also started diversifying its activity. In March, the company opened its platform to small businesses, allowing them to borrow up to $100,000. The next month, it acquired Springstone Financial, a company specializing in loans for education or health care. But it's not planning to expand outside the United State. Not yet.

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Geopolitics

How Thailand's Lèse-Majesté Law Is Used To Stifle All Protest

Once meant to protect the royal family, the century-old law has become a tool for the military-led government in Bangkok to stamp out all dissent. A new report outlines the abuses.

Pro-Democracy protest at The Criminal Court in Bangkok, Thailand

Laura Valentina Cortés Sierra

"We need to reform the institution of the monarchy in Thailand. It is the root of the problem." Those words, from Thai student activist Juthatip Sirikan, are a clear expression of the growing youth-led movement that is challenging the legitimacy of the government and demanding deep political changes in the Southeast Asian nation. Yet those very same words could also send Sirikan to jail.

Thailand's Criminal Code 'Lèse-Majesté' Article 112 imposes jail terms for defaming, insulting, or threatening the monarchy, with sentences of three to 15 years. This law has been present in Thai politics since 1908, though applied sparingly, only when direct verbal or written attacks against members of the royal family.


But after the May 2014 military coup d'état, Thailand experienced the first wave of lèse-majesté arrests, prosecutions, and detentions of at least 127 individuals arrested in a much wider interpretation of the law.

The recent report 'Second Wave: The Return of Lèse-Majesté in Thailand', documents how the Thai government has "used and abused Article 112 of the Criminal Code to target pro-democracy activists and protesters in relation to their online political expression and participation in peaceful pro-democracy demonstrations."

Criticism of any 'royal project'

The investigation shows 124 individuals, including at least eight minors, have been charged with lèse-majesté between November 2020 and August 2021. Nineteen of them served jail time. The new wave of charges is cited as a response to the rising pro-democracy protests across Thailand over the past year.

Juthatip Sirikan explains that the law is now being applied in such a broad way that people are not allowed to question government budgets and expenditure if they have any relationship with the royal family, which stifles criticism of the most basic government decision-making since there are an estimated 5,000 ongoing "royal" projects. "Article 112 of lèse-majesté could be the key (factor) in Thailand's political problems" the young activist argues.

In 2020 the Move Forward opposition party questioned royal spending paid by government departments, including nearly 3 billion baht (89,874,174 USD) from the Defense Ministry and Thai police for royal security, and 7 billion baht budgeted for royal development projects, as well as 38 planes and helicopters for the monarchy. Previously, on June 16, 2018, it was revealed that Thailand's Crown Property Bureau transferred its entire portfolio to the new King Maha Vajiralongkorn.

photo of graffiti of 112 crossed out on sidewalk

Protestors In Bangkok Call For Political Prisoner Release

Peerapon Boonyakiat/SOPA Images via ZUMA Wire

Freedom of speech at stake

"Article 112 shuts down all freedom of speech in this country", says Sirikan. "Even the political parties fear to touch the subject, so it blocks most things. This country cannot move anywhere if we still have this law."

The student activist herself was charged with lèse-majesté in September 2020, after simply citing a list of public documents that refer to royal family expenditure. Sirikan comes from a family that has faced the consequences of decades of political repression. Her grandfather, Tiang Sirikhan was a journalist and politician who openly protested against Thailand's involvement in World War II. He was accused of being a Communist and abducted in 1952. According to Sirikhan's family, he was killed by the state.

The new report was conducted by The International Federation for Human Rights (FIDH), Thai Lawyer for Human Rights (TLHR), and Internet Law Reform Dialogue (iLaw). It accuses Thai authorities of an increasingly broad interpretation of Article 112, to the point of "absurdity," including charges against people for criticizing the government's COVID-19 vaccine management, wearing crop tops, insulting the previous monarch, or quoting a United Nations statement about Article 112.

Juthatip Sirikan speaks in front of democracy monument.

Shift to social media

While in the past the Article was only used against people who spoke about the royals, it's now being used as an alibi for more general political repression — which has also spurred more open campaigning to abolish it. Sirikan recounts recent cases of police charging people for spreading paint near the picture of the king during a protest, or even just for having a picture of the king as phone wallpaper.

The more than a century-old law is now largely playing out online, where much of today's protest takes place in Thailand. Sirikan says people are willing to go further on social media to expose information such as how the king intervenes in politics and the monarchy's accumulation of wealth, information the mainstream media rarely reports on them.

Not surprisingly, however, social media is heavily monitored and the military is involved in Intelligence operations and cyber attacks against human rights defenders and critics of any kind. In October 2020, Twitter took down 926 accounts, linked to the army and the government, which promoted themselves and attacked political opposition, and this June, Google removed two Maps with pictures, names, and addresses, of more than 400 people who were accused of insulting the Thai monarchy. "They are trying to control the internet as well," Sirikan says. "They are trying to censor every content that they find a threat".

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